Tough time for luxury group Richemont as profit halved

Swiss luxury goods giant Richemont said Friday its net profit plunged in the first half of its fiscal year, with sales of high-end watches facing a particularly tough time.

Sales fell by 13 percent to 5.1 billion euros at the world's second-biggest luxury group, pushing down net profit 51 percent to 540 million euros ($600 million) for the six month period ending in September.

"The decrease reflected the weak demand for watches in general, as well as historically high comparatives and the impact of exceptional inventory buy-backs," said the group, which includes luxury watchmakers Piaget, IWC, Vacheron Constantin and Baume & Mercier.

Sales by its specialist watchmakers slowed 17 percent to 1.4 billion euros.

The buyback of watches from retailers and changes to the group's retail and wholesale network led the company to book a one-time charge of 259 million euros, which accounted for more than half of the 43 percent drop in operating profit to 798 million euros.

"Concerning watches, we will look to deal with overcapacity issues, adapting manufacturing structures to the level of demand," group chairman Johann Rupert said in a statement.

Group sales plunged 18 percent in Europe.

"France was particularly affected by a significantly lower level of tourist activity," said Richemont.

"The UK, however, enjoyed double digit growth rates in sales following the EU referendum" as the drop in the value of the pound made for some bargains for tourists.

In the Asia-Pacific region, the largest market for the group, the rate of the sales drop halved to 8 percent from 17 percent recorded in the same period last year.

The overall decline, due in large part to buybacks of watches "was partly offset by continuing growth in mainland China and positive retail, jewellery and accessories sales in the region".

Sales by Richemont's jewellery houses, which includes Cartier and Van Cleef & Arpels, fell by 13 percent, but the group said this was also primarily due to slower watch sales.